Korea’s Ticket Monster nabs $115M at a $1.4B valuation to ramp up in grocery

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After an M&A rollercoaster that involved getting acquired by LivingSocial and then Groupon (before getting spun out again), Korea’s Ticket Monster, a mobile e-commerce marketplace, today is announcing a major cash injection to boost its chances as an independent company in a highly competitive, tech-savvy market.

The company has raised $115 million from a new outfit, the Simone Investment Managers, along with existing shareholders KKR and unnamed global sovereign wealth funds — funding that its founder and CEO Daniel Shin tells me will be used to build out its newer grocery business as well as to expand its travel operations.

But the money comes at a price: Ticket Monster (commonly abbreviated to TMON) has raised the money in a flat round of 1.63 trillion won, or $1.4 billion. (Note: this is different from what Ticket Monster initially said, which was $1.2 billion, which is what many other outlets are reporting.) The company’s last fundraise of $40 million almost exactly a year ago valued the company at $1.5 billion, although that was more to do with currency conversions at the time, Shin points out. In the end, in local currency, the valuation has remained the same.

It’s a number, in any case, that points to how inflated and frothy the market has been of late, and maybe how arbitrary valuations can be: that $1.5 billon was double the valuation of the company when it spun out from Groupon the year before.

Shin tells me that the reason for the big fundraise is primarily to support the company’s newest vertical: it has launched Tmon Fresh, a move into grocery sales, with plans to double down on this space in coming months — a niche where Coupang, commonly referred to as the Amazon of South Korea and last valued at $5 billion, has yet to go, and where “traditional hypermarkets” — as Shin refers to physical grocery stores in the country — have yet to make any major headway.

“It’s only the traditional hypermarket giants like e-mart that are starting to invest online, but if you look at pure online players ,there is no Amazon Fresh or Ocado (which operates in the UK),” he said in an interview. “It’s a wide open market.”

(This is not completely true of course: as this article in Korea JoongAng notes, other online companies moving into groceries include Gmarket, Auction, Wemakeprice and SK Planet.)

The reason for TMON’s shift is simple: today, the company competes fiercely against Coupang in the area of general merchandise online, which currently accounts for 70 percent of TMON’s business but at a less good margin because of competition. Then another 20 percent of its business is accounted for in travel purchases. The remaining 10 percent is groceries: Shin said that consumers in Korea purchased 8.5 million unique products on its platform, accounting for 17 percent of the population. Groceries today account for around five percent of that. But, he added, groceries are by far growing the fastest.

And it’s an important lever to get people to come to TMON for other products, too: Shin says the grocery introduction has given the company a three-time lift in frequency of visits to the site.

“In order to buy groceries, you have to visit a store 2-3 times a week,” — clearly different shopping habits from the U.S. where the ‘weekly’ shopping trip, or one every two weeks, is often the norm — “but fashion-related purchases usually only take you to the store once a month. You refill on water and milk twice a week, so people come to TMON way more than others, and we wanted that to be our traffic driving anchor.”

Ticket Monster first made a name for itself when it was founded in 2010 as having a very mobile-first approach to e-commerce, unsurprising given that Korea is one of the most active mobile markets in the world, and a leader in the trend of people shifting all of their computing away from PCs and to the screens in their pockets.

The company started as a daily deals site (similar to Coupang, in fact) and it was for this reason that “it made a lot of sense to join forces” when another daily deals site, LivingSocial, came knocking.

However, as TMON continued to evolve its business away from daily deals and pivoted to more of a marketplace selling lots of items, and LivingSocial dealt with its own business issues, “it came to a point where we were strategically very different and no synergies and the mother company was very risky from a financial standpoint so we asked them to sell us to a more stable partner.” (Ironically, this is also the evolution that Groupon and LivingSocial — which Groupon acquired last year — also made, but at a slower pace.)

Shin and other execs and investors tried a management buyout at the point that LS was divesting, but Groupon became the buyer because of the timing of the deal. “Given the emergency situation [only a few months of runway left], someone had to buy us with little due diligence, who already knew a lot about us, and that was Groupon.”

But, as so often with rebound relationships, after a year together all the new union did “was reaffirm to us that we were unlike each other from a strategic perspective,” he said, but not in a bad way. “It felt like a great time because TMON was a leading e-commerce company in Korea and felt like we had a bright future.”

Since then the company has, prior to today, raised about $120 million in rounds of $70-80 million and $40 million. Simone is a new investor on the scene — and while some might question the solidity of investment choices made by new investors, Shin and TMON have a philosophy for how they approach this:

“Every round we’ve tried to partner with a blue chip name, and with a local partner. The spinout was with KKR and an investor in Asia to form a consortium, and this time we also made the same effort. KKR participated along with a bluechip sovereign wealth fund [which TMON is not naming but if you follow activities of sovereign wealth funds you might be able to make a good guess], and Simone, a local fund that will be less known in the world but has a network that can help TMON with the sales process and operations.”

“TMON has been a proven leader in Korea’s e-commerce market, and we are excited to see the company continue to enhance its competitiveness and expand into new and lucrative areas keeping the customer experience at its core,” a Simone Management spokesperson said.

This doesn’t mean that TMON is not ruling out mergers and acquisitions in the future. The landscape in Asia is filled with a lot of strong national leaders when it comes to e-commerce — looking at India, Turkey, China, and the Middle East you can see companies like Flipkart and Snapdeal; Hepsiburada; Alibaba and Taobao; and Souq.

That essentially presents an opportunity to the large multinational players to buy these to expand their footprint, as Amazon has done with Souq; or for some of these smaller players to combine to get more economies of scale. In the case of TMON, South Korea has only 50 million people, so there is a limit to how big it can be on its own. Interestingly, Shin tells me that he has talked with Amazon, although it was a long time ago: when LS was looking to sell the company, Amazon — as a shareholder of LS — briefly looked as a potential buyer.

The company is not yet profitable: Shin told TechCrunch that this is still a couple of years away. Last year, the company made $252 million in sales, but with losses of  about $137 million. This puts it close, but behind competitor Wemakeprice, which has only raised around $85 million according to CrunchBase and reported around $326 million in revenues last year with operating losses of $56 million. Both are a far ways behind Coupang, which posted $1.7 billion in revenues with operating losses of $498 million.

Updated with more detail about the valuation, in local currency.